“U.S. stocks have absolutely destroyed the competition over the past decade, but that’s not always the case,” says Charles Sizemore, a portfolio manager at Boston-based Interactive Brokers Asset Management, and principal of Sizemore Capital in Dallas.

He’s talking about a growing interest in international equities, particularly among holders of variable annuities (VAs). “It only makes sense,” Sizemore continues, “that variable annuity providers would want to make international markets available [to clients]. There will come another time, and probably soon, when international stocks will outperform for a sustained period of time, and this gives the variable annuity participants access.”

The use of international investments within VAs may not be exactly news. At least it isn’t to Michael Kitces, a partner and director of wealth management at Columbia, Md.-based Pinnacle Advisory Group. “This is nothing new,” he says. “I was using variable annuities with international subaccounts 17 years ago when I started my career. As long as there have been international mutual funds, there have been international subaccount options in variable annuities.”

The reasons, he goes on, are manifold. Advisors use international funds for the diversification reasons in all sorts of accounts. “The fact that they are inside of an annuity wrapper, instead of a brokerage account or an IRA, is usually just incidental,” Kitces says.

Improved Diversity In VA Subaccounts

Yet the number and variety of international subaccounts does seem to be on the rise. Clients want choices. If there’s an increasing number of VAs with international exposure, that’s part of a broader trend of growth in the range of VA subaccounts available.

“Recently, annuities have begun to offer more diversified international funds,” says Rick Leyva, a senior partner and managing director in the LDR International Group at San Diego’s Snowden Lane Partners. “Prior to the financial crisis, their mutual fund offerings and models were U.S.-market-centric with less than 10% exposure to foreign markets (and usually with unpopular international funds), while currently they are still overweight domestic managers but have also introduced best-in-class international managers with both equity and fixed-income offerings.”

Laurence Greenberg, president of Louisville, Ky.-based annuity provider Jefferson National, which operates as Nationwide’s advisory solutions business, confirms the trend. Citing data from Morningstar, he says, “Roughly 2,200 variable annuity products are currently available to investors. While a very small number of VAs offer more than 25 international and global funds, roughly half of all VAs offer 10 to 25 international and global funds.”

Last year, he says, those funds represented some 11% of total assets under management within U.S. variable annuities—or nearly double the dollar amount in such funds back in 2010.

Too Risky For Retirement?

First « 1 2 3 4 » Next